- The best way to invest in 5G…
- Why battery tech has been so frustrating…
- The simplest change to fight Google…
Welcome to our weekly mailbag edition of The Bleeding Edge. All week, you submitted your questions about the biggest trends in technology.
Today, I’ll do my best to answer them.
And before we turn to our mailbag questions, I’d just like to remind my readers about my Investment Accelerator event that took place this past Wednesday.
It was a great night. We dug deep into our strategy here at Brownstone Research. And we discussed five of the most promising opportunities I forecast for the next five years.
We also talked about how to turbocharge the gains in our portfolios… including the chance for readers to potentially share in $1 billion of tech stock profits.
That’s a big deal. For way too long, the world’s best investments have been roped off for the institutions, funds, and high-net-worth individuals with millions to invest. Normal investors have been locked out of the best opportunities.
But here at Brownstone Research, we’re determined to change that. I have spent the last several years developing strategies to stack the deck in favor of normal investors. And I shared my latest thoughts on Wednesday.
If you missed out, I have great news. You can click right here to watch a replay of my Investment Accelerator event for a few more days. I promise it will be worth your time.
And once again, thank you to everyone who attended.
Now let’s see what’s in our mailbag this week…
If you have a question you’d like answered next week, be sure you submit it right here.
Why I haven’t recommended Verizon’s stock…
Let’s begin with a question on network providers:
I own shares of Verizon and love its 4.6% yield. I can’t count the number of times you have contrasted favorably Verizon’s approach to 5G compared to its competitors AT&T and T-Mobile, yet you have never officially recommended this stock. Why is that?
– David D.
Hi, David, and thanks for being a reader. I’m really glad you asked that question. It’s a very logical one.
As a recap for newer readers, Verizon is going the hard route with 5G. It is building networks in the higher-spectrum bands that allow for 1 gigabit per second (Gbps) speeds or more, plus essentially no latency (delay).
This is a much slower and more expensive process because it requires a lot more infrastructure build-out (e.g., cell towers, base stations, and fiber). But it enables us to experience real 5G wireless technology as designed, not just a 5G network that performs more like a 4G network.
We can contrast this with AT&T and T-Mobile. Both companies have been building out their 5G networks using much lower-band 5G spectrum. This lets these network providers build out their networks faster and cheaper… but the resulting “5G” networks aren’t much of an improvement over 4G. And sometimes we’ve even seen worse performance.
This is the main reason so many news articles have come out – written by journalists, not technologists – claiming that 5G “doesn’t work” or is “no better than 4G.” Inevitably, they are unknowingly using these low-band deployments of 5G, not the higher-spectrum bands that demonstrate the remarkable performance 5G technology is capable of.
In the long run, this will play out in Verizon’s favor. Due to Verizon’s heavy capital investments in the higher-frequency bands for 5G, it will have the best performing 5G wireless network. And that will be a distinct competitive advantage compared to AT&T and T-Mobile.
But if that’s the case, would I suggest Verizon itself as a recommendation?
The short answer is no. And there are a few simple reasons…
First and foremost, there are much more exciting opportunities in the 5G space than a wireless network provider. The opportunities I write about in my research services are providing the technology enabling these new 5G networks, improving our 5G devices, and powering the incredible new applications 5G will enable.
In fact, our recommendations are the ones benefiting as Verizon builds out its network.
And we’re seeing the results in our model portfolios. We’re currently up double and triple digits on all the 5G companies in our Near Future Report and Exponential Tech Investor portfolios – including gains like 60%, 145.5%, 269%, and 276%.
Contrast our portfolio numbers with Verizon. If you had bought Verizon’s stock back in February 2016 and held it until now, you’d be up just under 10%.
That’s not the kind of return that I want to deliver to my subscribers. In The Near Future Report, I recommend “sleep well at night,” large-capitalization stocks that still have great growth potential.
Verizon’s forecasted revenue through 2024 shows very little growth, and its free cash flows will be lower for the next four years, at least compared to 2020. That’s due to the incredible capital expenditures required to build its 5G networks.
That said, if I were looking for a “sleep well at night” company with little to no expectation of a capital gain, but has a strong dividend, then Verizon is a company that I would evaluate.
And one of these days, I plan on launching an income-generating research service to recommend companies that achieve just that – “sleep well at night” stocks with strong dividends and some reasonable growth potential.
Back to Verizon, though. There are also some deeper issues with the company itself. Verizon currently has $150 billion in debt. And its revenues have been relatively stagnant. Since 2016, its annual revenue dropped by 2.7% in 2020.
The company has also made questionable business moves. I wrote about this last April when Verizon announced it would acquire videoconferencing company BlueJeans. Even though BlueJeans has been around since 2009, most of us haven’t heard of it. It never caught on. But Verizon saw the growing success of Zoom and wanted to hop on the trend.
The problem is that online videoconferencing is not Verizon’s core business. We see large companies make this mistake all the time. They step way outside of their core competency. And it rarely works out for them.
Verizon was also forced to take a $4.6 billion write-down back in December 2018 for its Oath media business. This was the business that former executive Tim Armstrong cobbled together through acquisitions of Yahoo and AOL. It was one of the dumbest corporate blunders I have ever seen.
By getting into videoconferencing, Verizon now must compete with Microsoft (Microsoft Teams and Skype), Google (Meet and Duo), Cisco (Webex)… and, yes, the giant Zoom. That’s not a battle Verizon is going to win.
So we’ll stick with our winning bunch of portfolio companies rather than saddling ourselves with Verizon. We just would never see anywhere near the kind of share price appreciation compared to the exciting technology companies that I recommend.
There are simply much better ways to gain exposure to the 5G boom taking place. And if any readers would like to learn about my No. 1 pure play on 5G, you can go right here to learn more.
The challenge of battery technology…
Next, a reader wants to know more about finding battery technology investments:
As a member of Exponential Tech and Blank Check Speculator, I try to read everything you write. Why haven’t you recommended new battery technology? Thanks.
– Johnny B.
Hi, Johnny, and thanks for being a subscriber. I’m excited to have you along on Blank Check Speculator, our newest venture here at Brownstone Research. (If any other readers would like to learn more, go right here for the details.)
As for your question, battery technology is one of my hot topics… More specifically, it’s one of the things that I am frustrated about.
Very few technologies have shown less improvement over the last three decades than batteries. Considering the incredible developments over the last 30 years, we still seem stuck with the same basic lithium-ion (Li-ion) battery design.
Yes, solid-state batteries are amazing. They use a solid electrolyte between the anode and cathode (the negative and positive sides of a battery). The resulting battery is capable of higher energy density. It is safe, can’t catch fire, has a longer life cycle, deals with heat better, charges faster, and can even be smaller compared to an equivalent Li-ion battery.
So why hasn’t the industry switched over to solid-state batteries? Why isn’t it replacing Li-ion batteries?
Simple. Solid-state batteries are difficult and expensive to manufacture. They are nowhere near being competitive on an adjusted price point to what Li-ion provides today. We are going to need some major breakthroughs in design and manufacturing before this shift happens.
And this stagnation in battery technology means there just haven’t been fantastic investment opportunities available to us. Most of the exciting developments in battery technology are still being refined and made more cost-efficient. And almost all of them are being worked on by private companies, which means normal investors simply can’t gain exposure.
Of course, I remain hot on the lookout for the best companies working in the battery space…
I’ve written before about the “glass batteries” that Nobel Prize winner Dr. John Goodenough is developing. He claims they’re superior with regard to charging and energy density. Canadian electric utility company Hydro- Québec licensed this technology last year and is currently developing it in-house. It may be ready for use in a couple of years.
And just this month, I wrote again about one of the most interesting private battery companies on my radar – Sila Nanotechnologies. It had an exciting $590 million Series F funding round with late stage investors. And I am confident this company will go public in the next 12–18 months. Maybe even sooner…
I’ll be sure to let my subscribers know if any of these companies make a good investment target in the future.
And as always, I’ll only be recommending companies that present a strong risk vs. reward set up. That means that the valuation of the company is critical to understand before investing in it.
Investing in a company like Quantumscape at a $19 billion valuation when it won’t have revenue for years is a quick way for investors to lose 80–90% of their money.
The simplest change to fight Google…
Let’s conclude with a comment about web browsers:
I like the way you write short, succinct articles. One small way for everyone to fight Google is to switch your search engine to DuckDuckGo or similar. It takes less than a minute. Take care.
– James W.
Hello, James. And thanks for writing in. Thanks for the feedback.
And you’re absolutely correct. I use DuckDuckGo and the Brave browser myself. These are great alternatives to Google’s services.
And when I am researching different things, I often use both Google and DuckDuckGo to analyze how Google is filtering information from us based on its own political agenda.
It is truly remarkable the extent to which Google tries to manipulate the way that we all think and how we view the world.
As longtime readers know, Google is first and foremost an advertising company. We are its product… not its customers. And Google not only sells access to our data as a part of its business model – it also shows biased results.
Back in 2019, it was revealed that agriculture giant Monsanto was paying Google to lead users away from an unfavorable news report discussing the negative health consequences associated with its products.
Later that same year, The Wall Street Journal reported on the way Google had changed its algorithm to favor large businesses over small ones. After all, big companies are the ones that write Google the big checks.
And last summer, we learned that Google’s privacy feature, “incognito mode,” was not as private as many assumed.
While it claimed to allow users to browse the web privately, Google is still tracking everything we do in incognito mode. It isn’t private at all. All incognito mode does is stop our browser from storing a history of the sites we visit on our devices. But Google still retains that information.
This is a mere sampling of Google’s faults and misdeeds. If readers care at all about getting the best search results or the privacy of their data, I highly recommend switching to other alternatives.
DuckDuckGo, for one, does not track you or capture your data. And I think its search results are pretty much on par with Google’s.
Brave browser also provides a search engine and even pays its users in its own digital currency… effectively sharing its advertising revenue with users if they opt in to seeing ads.
While it won’t completely remove Google’s influence if you’re still using applications like Maps, Gmail, Waze, or YouTube, this is a simple step that we can all take.
That’s all we have time for this week.
If you have a question for a future mailbag, you can send it to me right here.
Have a good weekend.
Editor, The Bleeding Edge
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